Rubin LAW ’64 talks economic crisis

Robert Rupin LAW ’64 may not have seen the recession coming, but he told a Law School audience Tuesday that he sees the beginning of its end — over a year from now.

Rubin, currently co-chair of the Council of Foreign Relations and formerly Secretary of the Treasury to President Clinton, laid out the causes and consequences of the financial crisis at the Arthur M. Okun Public Policy lecture held Tuesday at Yale Law School. Rubin’s lecture, “The Global Crisis and Decision Making,” packed the first floor of the Law School auditorium for well over an hour.

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“The economy today is experiencing one of the most difficult problems since the Great Depression,” Rubin said.

A cavalcade of issues led to the current economic crisis, Rubin said, including a housing bubble, low interest rates and unhealthy amounts of leverage in the business world. But those issues are complex and intertwined, Rubin said, which means that a solution will likely have to tackle a little bit of each.

“The current issue is complex,” he said. “Just as the causes of the Great Depression are still being debated, the causes of this will be too.”

Rubin said he learned lessons in policy making from a philosophy professor, who, Rubin said, taught students that there was “no certainty in decision-making.”

“All issues are inherently complex and all decisions are about probabilities, not certainties,” Rubin said.

No one in the financial industry, Rubin said, saw the danger posed by this confluence of factors. And because the United States is a major player in the global marketplace, Rubin said, the repercussions of America’s financial meltdown spread quickly across the world.

The speed of the global meltdown forced governments to react with what Rubin called “highly inadequate information and time.” But Rubin said governments should not be deterred by critics from taking swift action.

“Effective policies are often the least popular,” Rubin said.

Rubin then turned to suggestions for remedying the financial crisis. Obama’s stimulus package seems to have been well-received, Rubin said, but more needs to be done to guarantee that small and medium-sized firms have easy access to funds. He then told the audience to look to late 2010 for the first signs of economic recovery.

In the lecture’s question-and-answer session, Rubin said a balance must be preserved between innovation and constraining leverage.

At one point, a student asked Rubin what policies he would enact if he were the Treasury Secretary today.

“I thank God everyday that I am not,” Rubin retorted, adding that he generally approved of the actions of current Secretary Timothy Geithner.

Leonid Khayet, SOM’10, said he found the address “very balanced and pragmatic.”

But Geiv Dubash SOM ’10 said he found the lecture “a bit disappointing.” Dubash said Rubin did not address challenges faced by Citigroup in the run-up to his resignation from the company in January, after a decade with the company. In Rubin’s final year with Citigroup, the firm lost some $20 billion.

Past Okun lecturers have included Jeffrey Sachs, director of the Earth Institute at Columbia University, and Joseph Stiglitz, chair of the Committee on Global Thought, also at Columbia.